The Position of Creditors in Court-Approved Debt Restructuring Proceedings and Practical Guidance on Process Management in Türkiye

Court-Approved Debt Restructuring is a legal restructuring tool that allows debtors in financial distress to negotiate a repayment plan with their creditors. A debt restructuring application can be filed by both natural persons and legal entities.

It affects not only the debtor but also poses serious risks and legal deadlines for creditors that must be closely monitored.

What is a Court-Approved Debt Restructuring?

A court-approved debt restructuring is a debt settlement proposal by the debtor involving term extension, debt reduction, or both.
It serves as an alternative to bankruptcy, enabling the debtor to continue operations under legal protection.
Not only the debtor, but creditors may also initiate court-approved debt restructuring proceedings.

The court-approved debt restructuring is a formal restructuring instrument governed by binding rules.

Court-Approved Debt Restructuring vs. Insolvency – What’s the Difference?

Court-Approved Debt Restructuring enables the debtor to remain operational while allowing creditors to recover a portion of their claims. All creditors are treated equally; no priority ranking is applied.

Insolvency, on the other hand, results in the liquidation of the debtor’s assets and their distribution to creditors according to a ranking order. The recovery rate is generally low, and the debtor ceases business operations.

Step-by-Step Court-Approved Debt Restructuring Procedure in Türkiye

The debt restructuring procedure consists of seven key steps – from the application stage to the court’s approval or rejection.

1. Filing the Application

Filed by the debtor (or in some cases, creditors) to the commercial court.
If all required documents are complete, a 3-month preliminary respite (moratorium) is granted.

2. Preliminary Respite (Debt Repayment Suspension)

All enforcement proceedings are halted; no seizure may occur.
A debt restructuring commissioner is appointed by the court.
The respite may be extended by an additional 2 months if needed.

3. Final Respite

If the commissioner issues a positive report, a 1-year period begins, which can be extended by up to 6 months.
The debtor prepares the restructuring/repayment plan.
Creditors must submit claims within 15 days.

4. Creditor Claim Notification

For creditors, filing their claims with the commissioner within 15 days after the publication of the judicial debt restructuring is crucial. The claims submitted at this stage directly determine whether they will be included in the restructuring/repayment plan.

Important considerations:

Closely monitor all official announcements and deadlines.
Submit complete documentation and proof of claims.
For foreign currency claims, indicate both the currency and the TRY equivalent on the reference date.
Maintain regular communication with the commissioner.
If no claim is filed, the creditor may be excluded from the restructuring/repayment plan and lose the opportunity to recover their debt.

5. Creditors' Meeting

The debtor presents the proposed restructuring/repayment plan.
If the plan is approved by the majority of the creditors present, it becomes binding.
If rejected, insolvency proceedings may be initiated.

6. Court Confirmation of the Restructuring/Repayment Plan and Legal Consequences

If approved by the court, the restructuring/repayment plan becomes binding.
Creditors may only collect payments in accordance with the approved plan.

7. Rejection of the Debt Restructuring Plan and Consequences

If the court determines that the requirements are not met, the application for debt restructuring is rejected.
In this case, the effects of the debt restructuring procedure end, enforcement measures may resume, and the debtor may be forced into bankruptcy.

Since a court-approved debt restructuring can be highly complex, it is crucial for both creditors and debtors to seek professional legal and strategic advice to protect their rights and maximize recovery.

Legal Advice on Court-Approved Debt Restructuring

Would you like to learn more about debt restructuring, or do you have another matter related to insolvency law? Our competent team is ready to advise you and support you with all your questions.

Feel free to contact our law firm directly to learn more about our comprehensive range of Insolvency- and Restructuring Services.